Friday July 17, 11:09 AM
Renault reports loss, lifeline from Dacia brand
PARIS (AFP) - French auto group Renault (Paris: FR0000131906 - news) on Friday reported an operating loss for the first half of the year, saying that its global sales had plunged by 16.5 percent but a strong showing by Romanian Dacia had been a lifeline.
Total sales had fallen to 1.106 million units, the group said, but it also reported that it had generated strong free cash flow with a cost-cutting plan announced in February.
Free cash flow is a key measure of the rate at which the total structure of the company, production operations, other overheads and other factors, are generating a net, current value surplus of income over expenditure.
Renault, which is to publish full results on July 30, said that these would show a "negative operating margin in the first half" and also that the contribution from companies in which Renault has a stake would also be negative overall.
Renault said that Dacia, which makes a highly successful cheap saloon car, had raised global sales by 20.3 percent to 153,826 vehicles while sales under the Renault brand had slumped by 21.5 percent to 898,666 units.
Renault said that a French scheme of government subsidies for new cars bought if old ones were scrapped, introduced in December, and then copied by Germany and some other countries in Europe, had shored up the market.
The chief executive of Renault, Carlos Ghosn, said recently that he expected market conditions next year to be as difficult as those in 2009, notably because the scrap-for-new schemes would be wound down.
Ghosn said that Renault had held its global market share about steady in the first six months and that the figures for June were good.
He also said that Renault had some strong points with which to face the second half, and notably the full effects of renewal of its range of vehicles.
In the first half, the group launched six models.
The group also says that 60 percent of the vehicles it sells in Europe are considered to produce a low level of emissions, up from 48 percent in 2007.
In the first quarter, Japanese auto maker Nissan had contributed a negative figure of 1.151 billion euros (1.62 billion dollars) and Volvo (Stockholm: VOLV-B.ST - news) 83 million euros, Renault recalled.
Last year, Nissan made a positive contribution of 345 million euros and Renault reported a net group profit of 571 million euros.
Under a sweeping cost-cutting programme, Renault is reducing its workforce from 129,000 to 120,000 by the end of 2009.
Last week, rival French group PSA Peugeot Citroen reported a fall of 14.0 percent in global sales in the first half.
The Renault drop is broadly in line with the global market for cars and commercial vehicles, which fell by 16.5 percent in the first six months.
Renault's share of the global market was steady at 3.7 percent, the group said.
In Europe, where the market for cars has fallen by 10.6 percent, sales by Renault fell by 10.7 percent. Its market share was steady at 8.4 percent.
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